Oil ticks higher, market eyes US State of the Union address

The surge comes shortly after Washington slapped sanctions on the Venezuelan state oil company PDVSA.

Venezuela, which produced 1.15 million barrels per day in December, was forced to look for alternative clients for its crude oil following sanctions that prevent the state oil company PDVSA from exporting to the USA unless the revenues are paid to opposition leader Juan Guaido.

US West Texas Intermediate (WTI) crude futures gained 43 cents, or 0.8 percent, to $54.09 a barrel after posting a session low of $52.86 a barrel.

"In a market that's looking for direction, there's concern that any slowdown in the manufacturing sector would slow down demand".

"The weekly report from the EIA on US oil stocks was bullish for outright prices, plain and simple", said Tamas Varga, an analyst at PVM Oil Associates Ltd.in London.

Crude oil future prices eased for a third day with declines early in the morning as traders awaited inventory data from the Energy Information Administration.

Supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and allies since January have been supporting prices.

Saudi Arabia, the world's top oil exporter, told OPEC it had pumped 10.24 million barrels per day (bpd) in January, two OPEC sources told Reuters, exceeding requirements agreed in the supply pact.

A flotilla loaded with Venezuelan oil has formed in the Gulf of Mexico, some holding cargoes bought ahead of the latest US sanctions on Venezuela and others whose buyers are weighing who to pay. The government's official supply report is due later on Wednesday.

Russia's Energy Minister Novak said the 10 countries collaborating with OPEC now on oil price support could discuss a charter outlining open-ended cooperation when the two groups meet in April, state-owned TASS news agency reported.

Meanwhile, OPEC data shows that while Q4 2018 oil output was flat quarter-on-quarter, there was a sizable decline in output in December, by 750 thousand bpd month-on-month.

Citgo, the eighth-largest USA refiner and Venezuela's top foreign asset, is in the middle of a tug of war as the Trump administration has made aggressive moves to remove it from Maduro's control.

Global economic worries have weighed on market sentiment in recent days, offsetting support from signs that global supplies are tightening.

"The market is being boosted by optimism over the higher-level trade talks between the United States and China that were completed on January 31".

Adding to the bearish sentiment, CNBC reported that a meeting between President Donald Trump and his Chinese counterpart Xi Jinping was "highly unlikely" before the March 1 deadline set by the USA for reaching a trade deal.

  • David Armstrong